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8.0. INTRODUCTION
8.1. MRP is simply materials management of input items to the production process where
demand is relatively even over time. MRP comes in many forms but is primarily a computer-
based integrated system with varying degrees of complexity and scope. The best example of
a materials requirement planning system is the human brain, or any other brain for that
matter, not only does it provide the action link to `the knee bone is connected to the thigh
bone, etc., it brings in the blood and nutrients to produce the final product of movement,
intention and communication. "
The implementation of MRP in sugar industry help them to plan and discuss about Materials
requirements planning, referred to by the initials MRP, is a technique which assists a Sugar
industry in the detailed planning of its production. MRP translates that aggregate plan into an
extremely detailed plan
8.2. Requirement of production units. When and how many production units required,
Lead time requirements.
Level of Inventory at beginning of the planning horizon.
Scheduled receipts of inventory during period.
Other informations such as supplier names & addresses, lead-times and purchase quantities.
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8.3. MATERIALS AND METHODS
8.3.1. Material requirements planning (MRP) is a computer-based inventory management
system designed to assist production managers in scheduling and placing orders for
dependent demand items. Dependent demand items are components of finished goods such as
raw materials, component parts, and subassemblies or which the amount of inventory needed
depends on the level of production of the final product.
8.3.2. MRP systems offer a number of potential benefits to Sugar manufacturing firms. Some
of the main benefits include helping production managers to minimize inventory levels and
the associated carrying costs, track material requirements, determine the most economical lot
sizes for orders, compute quantities needed as safety stock, allocate production time among
various products, and plan for future capacity needs. The information generated by MRP
systems is useful in other areas as well. "A range of people in a typical manufacturing
company are important users of the information provided by an MRP system.
8.4. Evolution of MRP - Material Requirement Planning
The concept of Material Requirement planning (MRP I) was designed as a tool to help
planners with the derivation of the quantities of various material or components that would be
required for satisfying a demand and at the same time for deriving the capacity based plan for
loading the orders for production on the shop floor. The concept which started as a less
integrated mainframe tool has evolved over the years since 1960, from the time it was first
designed, to now, where it is tagged as Material Resource Planning (MRP II), a much
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stronger integrated version of the first MRP, integrating it with the finance, human resource,
purchasing and production modules of a business. It also had much stronger and complex
codes to take care of a few constraints in capacity and material planning.
The MRP II jargon later took on to be called as ERP or Enterprise resource planning with the
greatest possible integration with a central database server, storing all the integrated data
there for making the information and data available across the business, across business
modules and across its vendors/suppliers and customers. With the evolution of ERP (a
superior clone of the evolved MRP II) businesses took it as the most wildest tool that they
could have to make their business run smoothly, in a much integrated fashion without
losing any information or spooling the intension of the information when it flows across the
business.
SAP came across as the very first few companies which evolved the concept of MRP II in to
ERP and earning for themselves a growing business by selling this new concept. Companies
and businesses across the world made use of this ERP tool and the standard processes offered
to profit themselves.
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8.5. MRP in context with production management processes
Fig 1.Flow chart of production Management
Overall View of the Inputs to a Standard Material Requirements Program and the Reports
Generated by the Program
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Fig 2. Process of generating reports
8.6. DESCRIPTION
Material Requirements Planning is a time phased priority-planning technique that calculates
material requirements and schedules supply to meet demand across all products and parts in
one or more plants.
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Information Technology plays a major role in designing and implementing Material
Requirements Planning systems and processes as it provides information about
manufacturing needs (linked with customer demand) as well as information about inventory
levels. MRP techniques focus on optimizing inventory. MRP techniques are used to explode
bills of material, to calculate net material requirements and plan future production.
8.6.1. Object of Material Requirements Planning -The globalization of the economy and the
liberalization of the trade markets have formulated new conditions in the market place which
are characterized by instability and intensive competition in the business environment.
Competition is continuously increasing with respect to price, quality and selection, service
and promptness of delivery. Removal of barriers, international cooperation, technological
innovations cause competition to intensify. In terms of manufacturing emphasis is placed on
reducing cost while improving quality. In addition, other factors such as timely delivery of
the product become critical (this is captured by emphasis in Just in Time or JIT in short)
techniques.
8.6.2. MRP systems use four pieces of information to determine what material should be
ordered and when.
The master production schedule, which describes when each product is scheduled to
be manufactured;
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Bill of materials, which lists exactly the parts or materials required to make each
product;
Production cycle times and material needs at each stage of the production cycle time;
and,
Supplier lead times.
The master schedule and bill of materials indicate what materials should be ordered; the
master schedule, production cycle times and supplier lead times then jointly determine when
orders should be placed
8.6.3.The Master Production Schedule includes quantities of products to be produced at a
given time period. Quantities are included both at aggregate and detailed levels. Aggregate
may refer to monthly production and detailed may refer to weekly or daily p roduction. The
master production schedule takes the form of a table in which rows represent products and
columns represent time components. Entries of the table map to units o each product to be
produced at a given time period.
Bill of Materials gives information about the product structure, i.e., parts and raw material
units necessary to manufacture one unit of the product of interest.
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MRP was pioneered in the 1970’s with the work of Orlicky. Later evolved or became part of
integrated to Manufacturing Resource Planning systems (or MRPII). MRPII is a computer
based planning and scheduling system designed to improve management’s control of
manufacturing and its support functions.
8.6.4. Classes of MRP user/companies- MRP systems fall into four categories, often
identified as ABCD, in terms of use and organizational implementation.
8.6.4.1. Class A represents full implementation of MRP. MRP system is tied up with
company’s financial system and includes capacity planning, shop floor dispatching, and
vendor scheduling as well as links with human resource planning. There exists continuous
monitoring of performance and inventory records and master production schedules are
accurate.
8.6.4.2. Class B represents a less than full implementation. MRP system is confined in the
manufacturing area; however, it encompasses master production scheduling.
8.6.4.3. Class C represents a classical MRP approach in which the system is confined to
management of inventories.
8.6.4.4. Class D represents a data processing application of MRP. System is used for keeping
track of data rather than as decision-making tool.
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8.7. APPLICATION OF MRP
8.7.1. Types of firms / organizations that MRP can be applied - MRP is being used in a
variety of industries with a job-shop environment (meaning that a number of products are
made in batches using the same productive equipment). But the processes mentioned are
confined to job runs that alternate output product and do not include continuous process such
as petroleum or steel. MRP is most valuable to companies involved in assembly operations
and least valuable to those in fabrication.
8.7.2. Conditions for implementation - Several requirements have to be met, in order to
given an MRP implementation project a chance of success:
Availability of a computer based manufacturing system is a must. Although it is
possible to obtain material requirements plan manually, it would be impossible to
keep it up to date because of the highly dynamic nature of manufacturing
environments.
A feasible master production schedule must be drawn up, or else the accumulated
planned orders of components might “bump” into the resource restrictions and
become infeasible.
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The bills of material should be accurate. It is essential to update them promptly to
reflect any engineering changes brought to the product. If a component part is omitted
from the bill of material it will never be ordered by the system.
Inventory records should be a precise representation of reality, or else the netting
process and the generation of planned orders become meaningless.
Lead times for all inventory items should be known and given to the MRP system.
Shop floor discipline is necessary to ensure that orders are processed in conformity
with the established priorities. Otherwise, the lead times passed to MRP will not
materialize.
8.8. IMPLEMENTATION PROCEDURE OF MRP
Inputs to a standard MRP program
8.8.1. Demand for Product -Product demand for end items stems from two main reasons.
The first is known customers who have placed specific orders, such as those generated by
sales personnel, or from inter department transactions. The second source is forecast demand.
Demand from known customers and demand forecast are combined and become the input to
the master production schedule.
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8.8.2. Bill of Materials File -The bill of Materials file contains the complete product
description, listing materials, parts, and components but also the sequence in which the
product is created. The BOM file is often called the product structure file or product tree
because it shows how a product is put together. It contains the information to identify each
item and the quantity used per unit of the item of which it is a part.
8.8.3. Inventory Records File -Inventory records file under a computerized system can be
quite lengthy. Each item in inventory is carried as a separate file and the range of details
carried about an item is almost limitless. The MRP program accesses the status segment of
the file according to specific time periods. These files are accessed as needed during the
program run.
The MRP program works as follows:
A list of end items needed by time periods is specified by the master production schedule.
A description of the materials and parts needed to make each item is specified in the bill of
materials file.
The number of units of each item and material currently on hand and on order are contained
in the inventory file.
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The MRP program “works” on the inventory file. In addition, it continuously refers to the
bill of materials file to compute quantities of each item needed.
The number of units of each item required is then corrected for on hand amounts, and the
net requirement is “offset” to allow for the lead time needed to obtain the material.
8.9. BENEFITS
8.9.1. Primary Reports - Primary reports are the main or normal reports used for the
inventory and production control. These report consist of
1. Planned orders to be released at a future time.
2. Order release notices to execute the planned orders.
3. Changes in due dates of open orders due to rescheduling.
4. Cancellations or suspensions of open orders due to cancellation or suspension of orders on
the master production schedule.
5. Inventory status data.
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8.9.2. Secondary Reports - Additional reports, which are optional under the MRP system, fall
into three main categories:
1. Planning reports to be used, for example, in forecasting inventory and specifying
requirements over some future time horizon.
2. Performance reports for purposes of pointing out inactive items and determining the
agreement between actual and programmed item lead times and between actual and
programmed quantity usage and costs.
3. Exceptions reports that point out serious discrepancies, such as errors, out of range
situations, late or overdue orders, excessive scrap, or non-existent parts.
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8.5. MRP in context with production management processes
Fig 1. Flow chart of production Management
Overall View of the Inputs to a standard Material Requirements Program and the Reports Generated
by the Program
MASTER
PRODUCTION
SCHEDULE
SUPPLIER LEAD
TIMES
BILLS OF
MATERIALS
PRODUCTION
CYCLE TIMES AND
MATERIALS NEEDS
PER CYCLE
MATERIAL
REQUIREMENTS
OF MATERIALS
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Fig 2. Process of generating reports
8.6 DESCRIPTION
Materials Requirements Planning is a time phased priority – planning technique that calculates
material requirements and schedules supply to meet demand across all products and parts in one or
more plants
AGGREGATE
PRODUCT PALN
Engineerin
g Design
Charges
Firm
Orders
Customers
Forecasts
of
demand
from
random
customers
Inventory
Transactions
Master
Production
Schedule
Material
Planning (MRP
computer
program ) Inventory records
file Bill of material file
Primary Reports
Planned – Order schedules for
inventory and production control
Secondary Reports
Exceptions reports Planning
reports
Report of performance control
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